10/29/2015 1 Tuesday 10/20/15 11:15 – 12:45 Julie Brunner OPAL CLT DESIGNING & EVALUATING RESALE FORMULAS Agenda 1. Basis for allocating appreciation 2. Resale formula goals 3. Definitions 4. Types of formulas INTRODUCTION TO RESALE FORMULAS EQUITY & APPRECIATION Equity = Value Less Debt Initially = down payment Increases as debt is retired Increases as value increases Appreciation = Escalating Value Homeowner investment in property Community investment/factors
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10/29/2015
1
Tuesday10/20/1511:15 – 12:45
Julie BrunnerOPAL CLT
DESIGNING & EVALUATING RESALE
FORMULAS
Agenda1. Basis for allocating
appreciation
2. Resale formula goals
3. Definitions
4. Types of formulas
INTRODUCTION TO RESALE FORMULAS
EQUITY & APPRECIATION
Equity = Value Less Debt Initially = down payment Increases as debt is retired Increases as value increases
Appreciation = Escalating Value
Homeowner investment in property
Community investment/factors
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Limits appreciation for subsidized HOStrive to allocate
appreciation “fairly”Homeowner investment =
homeownerPublic investment = public
Protect public investmentCreates stock of
affordable HO
RESALE RESTRICTED HOMEOWNERSHIP
BALANCE OF INTERESTS
Community
Individual
RESALE FORMULA GOALS
Permanent affordability
Fair return
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RESALE FORMULA CONSIDERATIONS
What is a “fair” return?
What is the condition of the housing stock?
Nothing’s perfectly fair!
OPERATIONAL GOALS IN A FORMULA
Ease of administration
Minimize disputes
Property taxes
On-going updates
FUNDER GOALS
Wealth creation
Recapture & reinvest
Guaranteed affordability
Compliance
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How affordable was the initial pricing?
Less affordable conservative formula
More affordable more generous
Ease of administration!
MORE CONSIDERATIONS…
Fixed Rate Formulas
Index FormulasCPIAMI
Appraisal Based Formulas
Hybrids + Capital Improvement Credits
RESALE FORMULA OPTIONS
FIXED RATE FORMULA
Base price + multiplier
Multiplier = fixed %
Can be designed to
increase with time
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FIXED RATE FORMULA: ASSUMPTIONS
$250,000 = Cost to develop$100,000 = Subsidy available$150,000 = Original Affordable Price (Base Price)Affordable to a HH of 4 @ 61% AMI